For a large part of the more than 51 million retired workers who currently have a check from the Social Security, this income is essential for your financial well-being. Since 2002, the national pollster Gallup has conducted surveys year after year to determine the extent to which retired They depend on the income they obtain from the main retirement of the United States. These surveys have revealed that between 80% and 90% of retirees, including 88% in April 2024, depend, in some part, on their paycheck. Social Security to make ends meet.
This payment is a financial foundation for those who can no longer support themselves, and there are few announcements more anticipated than the revelation of the annual cost of living adjustment (COLA) which was done in the second week of October. Although the COLA 2025, recently introduced, gave the beneficiaries a reason to smile, COLA 2026 may be on its way to making dubious history.
Social Security COLA is Vital for Retirees
The end of the cost of living adjustment, Social Security, is to provide beneficiaries with help to combat the effects of inflation. For example, if the average price of a basket of goods and services purchased by older people increases by 2%, the benefits of Social Security should increase at an equivalent rate to ensure that there is no loss of purchasing power. The adjustment of COLA It is effectively the “increase” that is transmitted most years and that explains the price pressures faced by consumers. Beneficiaries.
The history of COLA of the program is a tale of two halves. Between 1940 and 1975, some adjustments were made arbitrarily in special sessions of Congress. In the 1940s, no COLA, while in 1950 a COLA history of 77%. In 1975, the Consumer Price Index for wageworkers and Office Employees in Cities (CPI-W) became the inflationary measure of Social Security, which allowed establishing a COLA annual. The CPI-W has over 200 different weighted spending categories, allowing this inflation index to be reported as a single figure at the end of each month.
When calculating the COLA, the Social Security Administration (SSA) uses only readings from the last 12 months ending in July, August, and September (the third quarter). If the average CPI-W reading for the third quarter is higher than the comparable period of the previous year, aggregate prices have increased and beneficiaries They are entitled to an increase. He COLA of the Social Security represents the year-over-year percentage difference in average CPI-W readings for the third quarter, rounded to the nearest tenth of a percentage.
Social Security’s 2025 Cost-of-Living Adjustment was Higher Than Average, But Far From Perfect
At the beginning of this year, the beneficiaries, They were waiting for a historic moment. After adjustments of the COLA 5.9% in 2022, 8.7% in 2023 and 3.2% in 2024, an increase of at least 2.6% would have marked the first time since 1997 that benefits increased in this amount for four years in a row. But, although a historic milestone was not achieved, payments are increasing by a higher percentage than average.
On October 10, the SSA public and COLA of 2.5% by 2025, which compares favorably with the average increase of 2.3% over the previous 15 years. For the beneficiaries of retirees, who represented 81% of the benefits paid by the SSA In August, the average check of Social Security will have an increase of $49 per month to $1,976 in 2025.